By Cristina Wiebelt-Smith, CPA, Associate Wealth Advisor
My father used to say, “There is a point at which you don’t want to work anymore and there is a point at which you don’t have to work anymore.” When these points collide, it is time for retirement.
My dad is very conservative with his retirement savings and never trusted financial planners, which made for some interesting conversations when I moved into the financial planning world last year. In his mind, financial planners were all about aggressively pursuing commissions. I joined GWA because the thought of cold calling and hard selling didn’t appeal to me; instead, I get to focus on helping clients create the retirement they want.
Choosing a Social Security Retirement Age
There are times when we wish a client would have come in a few years earlier so we could help them create a plan before decisions are made that cannot be undone. Choosing when to take Social Security is an example – many times, a new client has already started taking Social Security and maybe they chose the most beneficial year to start, but they might have also left thousands of dollars on the table.
You choose when to take Social Security, and while the timing may be based more on the emotional security of getting a check every month, it is better to be well informed about the options and know what you may or may not be giving up.
Lump Sum Pensions
Lump sums are another big one – there are several companies in our area and around the country that offer either a lump sum or a monthly pension during retirement. Again, there is the emotional security of knowing you will receive a monthly deposit for the rest of your life or your spouse’s life, but it is not always the best financial answer.
Deciphering the paperwork alone can be confusing and overwhelming, so we typically read all the documents with the client, illustrate the options and then let the client decide. We can also sit with the client while they call their employer if they are nervous about what to expect or how to answer questions.
Debating whether to work a few extra years to get a bigger lump sum amount is a common conversation in our meetings. Something to keep in mind is that even though the lump sum increases every year on paper, they are subject to change. For example, interest rates can have a significant impact on lump sum amounts, and even if you work a few extra years, you may end up with the same lump sum you’d have if you retired this year. This could be significant in your decision making.
Planning for Retirement
I tell everyone that April 15 is definitely too late for tax planning, December 31 is not much better, but a few years before is perfect! The same with financial planning – it is good to start a year or two before retirement and see where you stand. There is not a cost to sit down with us and let us illustrate a financial plan for you.
This is not to say that it’s too late for you if you’ve been retired for five years and are already collecting Social Security. It’s never too late to make some tweaks or discuss tax-saving ideas, which is why we meet with our clients at least once a year, if not more frequently. Seeing a plan tailored to your situation and goals right before you can be a game changer for people who are burned out with their job. Once the know they can retire if they want to, it tends to change their attitude for the better.
“I don’t want to work anymore, and I don’t have to work anymore” can cross paths with the right planning beforehand!